How I Doubled My P2P Investment Returns on The Rebuilding Society
In a previous post I wrote a long list of P2P Investment companies ordered by how much I loved them. Unfortunately The Rebuilding Society was pretty far down that list!
Because I got my face ripped off by investing there. Default rates were running so high that I was at one point making a negative return.
And it was all the more disappointing as all of my other holdings with other P2P companies were making a positive return.
However, all may not be as it seems. Returns have improved lately. And I now know how I can turn a modest profit like this:
Into a raging profit like this:
Wow – that’s 214% better return!
So how did I achieve this?
I’m lucky (or maybe unlucky!) that I have two accounts with The Rebuilding Society. Originally I wanted my company to invest in P2P loans, so I opened an additional account. However, as it turned out my bank would not touch anything to do with P2P so that turned out to be a complete non starter. That’s a different story, which I’ll go into some other time…
Anyway, with my two accounts I used two different investment strategies:
- Account 1 invested in new loans as well as those available through the Secondary Market.
- Account 2 only invested in loans available through the Secondary Market.
Can you guess which one had the much better rate of return?
So it turns out that Account 1 (new and Secondary Market loans) had a return of 4.17%. Account 2 has a much better return of 8.91%. This is an enormous difference. After 10 years at 4.17% per annum, a £1000 holding of loans could potentially turn into £1,517.37. At a higher interest rate of 8.91% that £1000 would grow to £2,437.30.
This definitely ties in with the credit analysis work I did on the Bondora data. I calculated that loans that Bondora issued were much more likely to default during the first few months of the term of the loan. New loans are risky!
This has certainly been the experience on The Rebuilding Society. During 2015 there was a spell of new loans defaulting in the first months. In a couple of cases the borrowers took out a loan and didn’t make a single repayment!
I think I will re-appraise The Rebuilding Society in light of my discoveries. There could well be some very attractive loans available on the Secondary Market. But I will still be careful – business loans are inherently risky and few of the REBS loans are secured on quality assets.
So what do you think? Have you had much success on The Rebuilding Society? Do you find bargains on other P2P Secondary Markets? Leave your comments below.